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angry tapir writes "It's not unusual for a freelance Web designer or developer to be burnt when a client refuses to pay up, citing one excuse or another. And what can you do about it? If a contract only amounts to a few thousand dollars, litigation to recover your fee can be far too expensive, and an increasingly vituperative exchange of emails is often not enough for client and contractor to come to agreement over who owes whom what. Into this gap steps judge.me: A start-up founded by Peter-Jan Celis that aims to provide internet-based, legally binding arbitration services — a 'small claims court' for the internet — with a particular eye on settling the conflicts that arise over freelance development and Web design."

I addition any Contractor who agrees to NET 30 payment shouldn't be accepting contracts.

For me it works like this:You pay 1 weeks rate up front, or 1/3 of the anticipated time if less than a week's estimated work to initiate servicesAll time is billed HOURLYThe only milestone is project completionAll Invoices are due Net 10.

If they want a "fixed rate" offer them what I call a capped rate which means you add 30% to your most conservative estimate and promise to halt work if that cap is met. This means that y

- 20-30% of the estimated contract price (which is billed hourly) up front as a good faith deposit (you're not going to start a multi-thousand/million dollar project for someone before they can show they can pony up)

- milestones every 25% of the estimated contract time (with that % becoming smaller the larger the project is). These milestones can be anything from "it's tuesday" to final delivery and anyt

Hello, article author here. Part of the reason judge.me exists is because people doing contract work often deal with clients that live in other countries or other locations in the same country. Plus the turn around can be super quick.

As an experienced contractor who mainly deals with overseas clients, all I have to say is that if you go into this sort of work without fully understanding the risks them you should give it all up and go do something else.

Some basic rules.

1) Agree a payment plan. Stage paymens for specific milestones.2) Use an accountant who knows what they are doing wrt international business3) Suggest using an escrow account. Client pays all the money up front. Then agrees to release parts as deliveries are made. Also agree a timeout clause so that if they don't agree the final payment you get it automatically after 6 months. Russuans are very bad at agreeing the final payment.4) Use a Lawyer who knows about international contract law.5) Both parties to agree that the laws of ONE country shall apply to the contract. UNLESS it is with former parts of the USSR that are not in the EU. Then agree Swiss Law.6) Every change no matter how small must be agreed in writing and signed off with agreed costs. Do not do anything as a freebie. This habit is endemic in many countries especially in Moscow.7) Make sure that the person on the other side is actually authorized to sign the contract. I've had clients try to wriggle out of payment saying 'He was not authorised to sign the contract so we can't pay you'8) If you are gonig to sign away the title of the stuff you develop then make the transfer of title a separate contract. Agree in the original contract that totle will change hands only when the job has been completed AND full payment made.9) Learn the language especially the swear words. A few curses in their language can work wonders when a client is being awkward.

At first doing business in 'foreign' parts may seem like a nightmare waiting to happen. Sometimes it does have its unexpected rewards though. Mine is meeting a beautiful and intellegent woman in Novosibirsk in 1995. We have been maried for nearly 15 years.

This (other than the swear words)! Nerds who have no business acumen have no right trying to run a business. I've been contracting since '87 (yes, an old fart) and you ALWAYS have progress payments as part of the deal. That way, if the client decides not to pay at some point, you down tools immediately, minimising your exposure.

From one A.C. to another: thank you for your amazingly great advice. I'm going to shoot myself now, since you have shown that we are all mistaken. Also, please, set up a website called experiencedcontractor.com so that other people realise that they are doing everything wrong.

If you think you fully understand the risks, then you don't know anything. You never fully understand the risks. You can, however, try, fail, and try again and again until you learn.

Here's why I'm going to kill myself:

a) I don't know most of my clients. Most of the times I don't even see them. Not even once. I don't know who they are or where they live.

b) I can't afford an accountant. Not when you deal with low-budget projects. If I could afford an accountant, I would be able to afford a lawyer.

c) It doesn't matter how much you agree. It's written on emails. Emails cannot enforce the law.

d) I'm not going to learn the law of 7 different countries to deal with 7 different clients. The law is vast and contradictory. It's often written in the local language. It would be difficult to learn the French law if you don't speak French, or the Polish law if you don't speak Polish.

e) I'm not going to learn 7 different languages to threaten 7 different clients.

f) I can't make sure of most things. As I don't see the counterpart, I can't really know who they are, where they work, or whether they can pay.

The only thing I am doing is 3 (till the first period). But that won't save my soul from burning in hell, will it?

My rules of thumb (so far, I've always been paid, even though some times I had to fight it a little):

1) Use an intermediate party that, for a small percentage, checks the payment record of your client, offers escrow, milestone handling, keeps records of the messages you send/get from the client, and can make a sensible decision if your client ignores you forever.

2) Most people pay if they paid others before. If your client has a good payment record, set up bigger milestones, request a smaller escrow. If your client has no record, set up very small milestones so that you know, right from the beginning, that they can pay. I've broken up projects into milestones so ridiculously tiny that you wouldn't believe. And yet, the clients were comfortable with that because they knew they would be able to review the project from the very beginning, and that they weren't sacrificing much. Avoid clients with many bad reviews or who do not pay.

In my experience, most people pay promptly. Some take some time to review the projects carefully. Others take a long time. But when you let them know that you did the work, that it really works as expected, and that you are a freelancer, not Accenture. I even had one that paid me beforehand just because he didn't want to keep me waiting until he could review the whole thing. I didn't ask for this. I never met the guy.

People are nicer than we often think. Setting up lots of systems to help you get paid and resolve potential conflicts, at the expense of easier communication and a fluid work-flow with the client, can lead to a self-proving prophecy.

First of all, if you are doing this kind of work then an accountant and a lawyer should be part of your cost of doing business. You can get both on budget so that you're not paying a lot; either, way you pass on the costs to your clients as part of the overhead of the contract. Talk to some lawyers and accountants, find out their payment structures, retainer fees, etc. It'll pay off big time in the long run.

Secondly, if you are paying a 3rd party to do the checks, etc. for a small fee; you could have you

All great suggestions. My caveat would be that all your suggestions re Russia really probably apply to most of the world. My experience is especially with India and Pakistani small businessmen, and they do the very things you specifically call out as "especially in Russia".*except the "bride" thing, that's perhaps a compensation Russia excels in.:)

Essentially, I've found that you can be a fairly successful small businessperson in the US midwest assuming a fair amount of trust. The rest of the world? No

No, he simply listed his experience with that particular culture. If you want real trouble, try doing business with chinese. And if you are REALLY masochistic, I recommend one of the smaller Asian countries or Africa.

Oh you can do very good business with Russians, but you should know what you are doing and be careful. Also be very careful once the drinking starts. No matter how much you thought you can stomach, they will probably still be driving home while you are already under the table.

To the degree you can agree on one. What I've seen is that it's very hard - even with Agile and whatnot - to deliver value in the same pace as you deliver work. Particularly if the client wants to retire or replace an old system or it needs to have some integrations to other systems before they can use it, or simply setting up the structures to implement the business logic in. And if the client wants to bail halfway because they're not happy with the quality or performance or cost of change requests or what

A classic case of "Si vis pacem, para bellum". If you want to do serious businesses do not ever expect your customer to be "nice". Hoping for it and to a degree acting like it is ok, but be prepared if they are not. The above list is a very good start.

1. Full requirements up front. I do NOTHING before I know exactly what I am to do. Including timeline, interface appearance and ALL features.2. 1/3 payment up front. Not negotiable.3. 1/3 payment on delivery of Beta. Not negotiable.4. Final 1/3 on delivery of spec'd requirements (see #1 above) NOT negotiable.5. No fucking scope creep. All features requested after requirements accepted are 3X the price they would have been if included in #1. NOT negotiable.6. If any of the payments

This is the same issue as with any other arbitrage. The point is that all parties agree, in writing to be bound by the arbitrage. If arbitrage finds against your opponent, you can simply go to a local court and ask to enforce the contract, which is fairly easy. Without arbitrage you'd have to argue your case in opponent's local court, which is exceptionally hard.

Essentially this appears to be an "accessible arbitrage" option. I'm doubtful that it will succeed as there are plenty of good arbitrage options al

I haven't looked into this particular service, but usually arbitration awards are directly enforceable in U.S. (and foreign) courts. So, instead of the expense of having the whole dispute heard over again, you would simply take your arbitration award to a court and ask nicely.

What's the point? If the client agrees that there are issues to be settled, and possibly some payment to be made, negotiation is the way to go. If the client refuses to pay, he is not likely to agree on any kind of arbitration that he can't control. And even if it goes against him, what will force him to pay?

Part of the reason judge.me exists is because people doing contract work often deal with clients that live in other countries or other locations in the same country.

It can be possible to enforce judgments aginst an entity in a foreign country (especially if they have assets in your country).Does this website have any enforcement powers even if all parties are in the same country?

Except when they ignore judge.me they are breaking a second contract with Judge.me as well as the developer.

Judge.me has a vested interest in making sure its rulings are followed and also as part of operating costs would have the resources to follow through with legal matters much further than their clients' could on their own.

Real small claims court doesn't spend much time on investigating claims. To clear cases quickly the judge quickly weighs up sides and makes a snap decision. Under the adversarial system of justice its not about finding the truth, but about who deciding presents the best arguments. That's easier for the judge, but it shouldn't be confused with justice. In some jurisdictions you can't appeal or even be told the reasons. The judge makes a mistake (they are human so it happens) you won't even know.

Small claims court weren't created because they are better than the bigger courts, but as a way of offering the little people cheaper although less reliable justice. The bigger courts are worse though since they are extremely expensive charging rates that cannot be justified. Whoever has the most money to fund the most appeals and buy the better lawyers wins.

Arbitration is in theory a great idea, but a big problem is that the arbitration system is taken over by judges and lawyers charging the same rates. It's sold as a cheaper alternative, but it has many traps. One problem is a big company who nominates an arbitration company (yes, they are companies) will pick one that gives them favorable results or they won't get repeat business. I loved Erin Brockovich the movie, but the arbitration system they used has been severely critcized by some of their clients. If you loved the movie then don't read this:

Some quotes from that Salon article. Highly recommended reading:
"Arbitration is billed as a cheap, quick and private way to resolve civil disputes. The practice gained momentum in the 1980s, when judges, bowing to pressure to alleviate overcrowded courtrooms, began encouraging litigants to resolve their disputes voluntarily. Since then, arbitration has snowballed into an unlicensed industry that’s conservatively estimated at $350 million in annual sales, according to a spokeswoman at the nonprofit American Arbitration Association.

“We hear a lot of complaints about these cases,” said Gerald Uelman, professor of law at the University of Santa Clara. The for-profit arbitration business is booming, especially in California, he added. “It’s upsetting to the extent that it’s a resource used by institutional litigants.”

One big reason for the boom is money. Public judges, who earn about $150,000 a year in the public courts, often retire early to become, in effect, rent-a-judges. By doing so they can earn between $100 and $500 an hour — easily doubling or tripling their salaries. Arbitration firms often have powerful attorneys or corporations as steady clients. They pay monthly retainer fees or get volume discounts. As a result, some for-profit justice firms have a vested interest in keeping their clients happy if they want the return business, which has been the topic of seminars sponsored by the California Judges Association.

The rules that apply in open court often aren’t followed in private court. No laws prevent the hired judges from accepting gifts from attorneys. Another criticism is that the arbitrators and their clients and attorneys often work together regularly. “The same judges are often employed by one side or the other,” said Uelman. As it turned out, Girardi had ties to at least three of the private judges in the PG&E case: Jack Tenner, John Trotter and Jack Goertzen. Had this occurred in public court, judicial rules would have forced the judges to recuse themselves from the case due to a conflict of interest. But no such ethical standards bind participants in private arbitation."

Well... there's the solution right there to dirtbag deadbeat clients. Work on retainer. I don't know why more business isn't done this way, as though only attorneys are smart enough to insist upon it so much that it becomes convention. If enough developers begin insisting on retainer before one line of webcode is writen, then it becomes standard.

Another idea would be to insist on using credit card companies for payment... and billing becomes a quick and easy electronic transaction: credit card given, work

> whats wrong with the real small claims court?Real small claims court doesn't spend much time on investigating claims. To clear cases quickly the judge quickly weighs up sides and makes a snap decision.

Considering the fees charged by judge.me, and the description on their web site, they are no different than a small claims court in that respect.

As someone who was fringe involved in a small claims court case, I know that in my case the judge flat out stated that she had not even read the filled out form/presentation of evidence/reason for case.Just the one sentence title/summery (X amount for Y).

I have trouble assigning authority to volunteers on the internet.Small claims courts typically handle under $500 u.s.When you buy a car and don't pay for it, a REPOSESSOR will come and " steal" it back legally.There really needs to be an analog for web design. Don't pay for the work? I come delete the relevant files from the server. An agreement needs to be supported by the server provider and all 3 parties need password access to the site in question. Just work over the business model a little bit, it's no

If both parties are local they should indeed probably go to small claims court, but if they are in different regions then it quickly becomes cost prohibitive, esp since you have to escalate the case to something higher anyway if you want the decision to apply to someone in another county/state/country.

I've been in that situation a few years ago, and one thing that works well, provided the client is reasonably well known, is to threaten to shame the hell out of them on various websites / forums and getting search engines to come up with "these guys don't pay their bills", "thieves" or other such results when someone types their name.

Of course, it's not that easy to do, but it's doable enough (and has been done before) that the client might think again and cough up the money.

Posting this anon for obvious reasons but wouldn't it be more effective to set some traps until it is paid up? In mass market software, this is simply called a trial period running out unless one has a code after payment. Chances are most clients are too technically incompetent to even disable bad crude implementations of this.

Depending on the 'trap' you set the client could find some one cheaper and competent enough to fix it. Sue you for damages, or have you legally liable for other laws. It also puts out a bad reputation for you as well and gives the client some ammunition as to why they are not paying.

Some things can be done, like withholding some code till payment is received, but generally everything like that needs to be outlined in the contract before hand.

It's great that they're offering a cheap way of pursuing binding arbitration (and as has been mentioned before, there's still small claims for amounts below a given threshold), but the hard part isn't getting a judgment - it's collecting on it. There are plenty of folks out there that are quite comfortable with ignoring a judgment and going out of their way to make collection far more expensive than it's worth, particularly when they don't own any of their equipment or have any other real assets to seize. If it's an overseas client, you're probably better off just writing off the loss from the get-go.

I have been thinking on this, and your suggestion is good. The option I thought of was requiring equal pay to both sides of the case for each client. As in, if I only pay my lawyer $100, then I have to pay your lawyer $100 also. If Bethesda decides to sue you and let you know their lawyers charge $10k/day, then they will need to cough up $20k/day because they will be paying your lawyer that much as well. This would solve the same problem your suggestion solves, but would level the playing field in lawye

The looser is required to pay the winner the same amount as that which they paid their own lawyers. But there is nothing preventing the winner from paying his own lawyer more (or less) then the amount awarded.

The looser is required to pay the winner the same amount as that which they paid their own lawyers. But there is nothing preventing the winner from paying his own lawyer more (or less) then the amount awarded.

Not necessarily in Oz, legal bills can be fought over as the loser attempts to lessen the punishment (the winning side may be asked by a judge to justify the amount they have asked for if the judge thinks its unreasonable).

But if you have a good case, you may get a lawyer well above your pay grade who will fight to get the loser (who can pay them) to pay their high price. A high priced lawyer taking on cases on "no win, no fee" basis is not unusual.

If I have a $20,000,000 legal fund and I sue you, Me paying your bottom feeder $150 an hour lawyer is not a big deal, and the possibility of me winning is huge as I can fabricate all kinds of credible evidence... Look at the RIAA and how they fabricate all kinds of stuff.

If I have a $20,000,000 legal fund and I sue you, Me paying your bottom feeder $150 an hour lawyer is not a big deal, and the possibility of me winning is huge as I can fabricate all kinds of credible evidence... Look at the RIAA and how they fabricate all kinds of stuff.

But Dr Evil,

This is the exact opposite of what has happened in Australia.

Rich people are afraid to sue poor people because that 150 an hour shmuck lawyer needs only to find enough evidence or fabrications to exonerate his client, then the counter-suit for deformation can cost them a sizable percent of their fortunes. Not to mention the possible jail time for attempting to defraud the court. Fabrications are hard to do right and you cant un-create evidence that the opposing side has, the court in Australia r

I sued an ex-client in small claims. One of the defendants had a lawyer for a dad who tried to be as much of a weasel as possible. They moved it to civil court threatening to sue me for 10's of thousands. I handled my own side of it and still won without stepping foot in court. Cost maybe $80 all together for filing fees and postage and got every penny I was owed.

The agreement on who owes who what should be settled before work begins. You're then just going to court to enforce a contract when one side doesn't deliver. For small amounts you're on your own. You'd spend more on lawyers than you're owed and if the client has a lawyer, you just have to deal with it.

If you're lucky, they come to their senses and you can avoid the courtroom. What would really be helpful is simple legal advice. Even arbitration is a little late to the game. You need to know whether you even have a case, what documents you need to win your case, etc, what arguments you need to make, etc.

Showing up to arbitration unprepared is no better than showing up to court unprepared.

The simple solution is to just never leave large sums of money on the table and work with people you trust. I don't like racking up large invoices simply because I'd rather have cash in hand. I can't pay bills with invoices.

A web design could easily be considered a work of art, thus covered by copyright. Normally a designer has no claim to copyright on works created on behalf of an employer/client, but if they fail to pay up, then how could they legally claim to own said copyrighted works? DCMA their asses!
Or, if their is any server side coding involved, build in a kill switch which you will only be removed after final payment is received.

You could always host your content on some sort of staging server, and setup the agreement hat you give the content over to the client upon final payment. EC2 is a great solution for spinning up servers for client projects on a as-need basis. That way, the customer never really has access to the final code until they pay.

DMCA take-down notices are only useful for sites that are are using the DMCA safe harbour provisions. For example, by complying with DMCA take-down notices, YouTube is not liable for copyright infringement by their users. This does not apply to people putting their own content on their own web sites: they are always liable, so you're back to it being a straightforward case of copyright infringement. You can take them to court for this (in addition to breach of contract), but that's still expensive.

Going to court is the last thing I ever want to do in any way shape or form. For a few thousand dollars, it's not worth all the horrible hassle. But this also means, that this amount may not very much for clients either then, and proper planning and agreements can successfully solve this issue before it starts.

PROBLEMS:1. New clients (in my 13 years exp.) are the ones that will screw you most likely (if you don't know then and they are devious). Old clients with a history of problems, are the second on the list.

2. Bad communication and unbalanced expectations are the start of most conflicts that end up with you not getting paid.

3. Lack of planning/preparation will always come back to bite you, not the client.

SOLUTION:1. Document everything you will build. Outlines, descriptions, mockups. The amount documentation depends on the scope and budget of the project. Smaller projects get less specs written, and also have less risk.

2. Write a Cost Proposal that itemizes the costs by feature or whatever can be broken out and separated. This also allows the client to pick and choose which items they don't want. (lowers your bid and makes your project feel more in the clients control)

3. Write a timeline with payment schedule and milestones. This is where you put MONEY UP FRONT, as the first item on the list. Depending on the amount of the total project, I usually ask for 30% to 50% up front. If it's a good client, and not much money, I may ask for 100%.

3b. For each milestone simply include which features will be done, and the dollar amount expected at that point in time.

4. Have the client AGREE to the payment schedule, the specs documents IN AN EMAIL. I have had a hand full of times where verbal agreements bit me in the ass because the client was slightly manipulative. This is NOT a contract signing thing, just written proof that the client agrees to start work that is documented.

5. Do NOT start the work until the first payment is recieved. This can be flexible depending on the trust you have with your client.

RESOLUTIONS1. Now, when/if your client balks at a payment, a) you've already gotten some money, so the stress is greatly reduced, and you have documentation detailing everything you agreed to do.

2. If client complains that feature X is NOT THERE, you can simply refer to your documentation saying what you agreed to build, and that feature X is NOT in the documentation, and that you can put a proposal together for the client for feature X.

3. When a client complains "I told you on the phone" (happens FREQUENTLY) you state, that you only do work that is documented or the request is done in writing. (ie, email) BE SURE to state this UP FRONT when you send the specs documenation, and even include this in the specs. Just doing this has SAVED MY ASS.

4. Follow rules for work, not memory. I had a client say that a missing feature was a "bug". He said I told him on the phone that I would "fix" it. I was lucky to remember this issue from a few months ago (very lucky) but also explained that we had to use a "rule" to distiguish between bugs/flaws (my responsibility) and feature requests (clients financial responsibility)

5. Don't start on the next milestone, until payment is recieved. This again is flexible based on your relationship with the client.

6. Take care of your client, they often shoot themselves in the foot. They don't always understand technology, the internet, or design. Education and patience will pay off big time.

7. Take the blame readily when something is your fault, and fix it. That way, when the client is pulling something, you have no qualms about putting your foot down. (make negotiating infinitely more benefitial to you)

I would never agree to a contract with a judge.me arbitration clause if there were any real money at stake. There is a very serious difference between their arbitration process and almost all others: they attempt to completely replace all statutory and case law with "principles of fairness". There are two problems with this: First, statutes and case law exist because they are helpful in resolving cases. Without them to control the outcome, there is no way to accurately analyze the dispute in advance (or even the original contract itself) to determine the probable outcome. You have no way of knowing what whim the arbitrator will use to guide the decision, and no right to complain even if it's unpredictable or contrary to the real law. Make no mistake, the ambiguity is huge - thus so is the risk. This vast unpredictability defeats the entire purpose of having a dispute resolution process.

The second problem is even bigger: Not all law is waivable. Many procedural protections, consumer protection laws, and some case law cannot be waived by contract. Although the judge.me arbitration clause purports to waive all law in favor of their own ideas of equity, this is not legally possible. This creates a total mess. If the arbitrator fails to correctly consider and apply non-waivable law, the losing party could sue in real court to overturn the arbitration award.

A court or someone trying to provide "binding arbitration" without legal authority makes no sense. If I were a client and some web developer didn't finish a job, for instance, and tried to insist I pay him, I'd refer him to the new website blow.me.

If you supposedly owe someone money, and don't want to pay, and they can't force you because it would cost them more money than they'd likely get out of it, so they try to insist you go with them to arbitration... what do you have to gain? You've already won, why waste a second? It'd be like getting subpoenaed to go before "Judge" Judy. I'd tell them to eat a fat, hairy dick!

My guess is this new business venture is going to FAIL hard.

Absolutely. Both parties have to agree to be bound by the decision. This is not quite useless, I can see some cases where it might work. Firstly is where both parties believe that they are in the right. Secondly when being bound by this service has been put into the contract to start with; I might feel happier signing up to a contract with a provider in some countries if their contract stipulated this than if it said "you will be bound by the laws of the Cameroon" for example. (I should say that I have no I

If it is for somebody not paying, I've sold the amount due to a collection agency before. The best deals I've found essentially buy the debt for 50%, and then they are free to do whatever they want to collect it. Then I'm free to work on my next client project, instead of spending all my time dealing with dead-beat clients who won't even pay even if I took them to small-claims court.

That's the problem with unsecured debt -- you are last on the totem pole to get paid.

TLDR; Arbitration is legally binding across countries, so unless the contract specifies your country as where conflicts will be handled, there are significant risks in terms of fees (in my case $150000) and risk (all my personal assets). The other country may not share your country's view of limited liability, and madman clients may make claims that do not make any sense in your part of the world that you are forced to defend yourself against.

I usually divide the project in three phases: start, beta release and final release. At the start, I require 50% payment. The beta release requires another 25% and the final release requires the rest of the money.

If you're then worried about the payments, I'd use an escrow service such as Elance.

I don't see any help for cases in which the client goes out of business. Certainly not this arbitration. I'd win a judgment, no problem. And then the judgment would go unpaid. That's what they always say about court. Winning judgments is easy. It's collecting that's hard. I'm only one of a long list of former employees, contractors, and creditors who are owed money. The chain of claims doesn't stop there either. The primary investor was sued and everything that could be clawed back was clawed back,

Fine, you have your "eVerdict", now send some "eGoons" to collect on it.

Small claims awards are recovered by real bailiffs seizing real property, or by their threat of that happening. Good luck on getting someone who's already welched on a debt to give a damn what some online nerd has declared.

Don't do any work for someone you don't trust without money up front. If you went to a lawyer for a consult on this very subject, despite what he may or may not advise you, what HE is going to do is tell you up front that he needs a check for $350. Once he's taken that check he'll advise your ear off for an hour or 2. Then he will tell you to send another check, this time $1,500 to be placed in an ACTF. Attorney Client Trust Fund. No reason you can't make a DCTF (developer....) The lawyer will then bil

As the submitter notes, the defendant knows that suing them over a few thousand dollars probably doesn't make financial sense, so they are free to screw you with no fear of recourse. So why, exactly, would they be interested in participating in this type of service if offers them nothing and potentially opens them up to costs and liability?